Section 149(3) of the Companies Act, 2013 requires every company to have at least one director who has stayed in India for a total of not less than 182 days in the previous calendar year. For a subsidiary of a foreign group, where the board is often made up of directors based abroad, this is easy to overlook until the first filing season.
What the rule says
- At least one director must be resident in India, meaning a stay of 182 days or more in the previous calendar year.
- For a company incorporated during a year, the stay is counted proportionately for that year.
- The requirement applies to all companies, including wholly owned subsidiaries and private companies.
Why it matters in practice
If no director qualifies, the company is in default of the Act, and the company and its officers can face a penalty. The point is also checked by auditors and by banks and authorised dealers during onboarding.
Common ways to comply
- Appoint an Indian-resident individual as a director, who may be a senior employee, a professional or a nominee of the group.
- Relocate an expatriate manager to India. Check that the expected stay will cross 182 days, and keep passport stamps or other proof.
- Plan the timeline. Residence is judged on the previous calendar year, so a person who arrives in July may not meet the test for the first year.
Related points
- The director should hold a DIN and complete the annual KYC.
- A foreign director does not need to be resident, but a company with all directors abroad has no one to meet the 182-day test.
- Residence under company law is not the same as residential status under the Income-tax Act, so do not mix the two tests.
- A resident director is a statutory office with duties and liability, not only a compliance device. Give the person real authority and information.
A short board note recording the days of stay for each director, reviewed every January, is a practical safeguard.
The author is a M.Com., FCS, LL.B., is a Partner at A2 Consultants, Hyderabad, which advises foreign companies on entering and operating in India. The views are personal and for general information only.
CAclubindia
